Profile picture for jimmy57

Obama's Housing Plan, Feb 2009 edition

My first take:

Mostly smoke and mirrors.  Complex, conditional -- mostly dependent on willing participation by upside-down borrowers and their lenders.  End result :  much less effect than projected. 

Not enough funding to make much difference against the scale and scope of the issue, anyway.

Anti-capitalist in its conception, therefore likely to keep smart money away -- to continue waiting for the inevitable further drops in prices.  Further delays the economic recovery.

(Smells a bit like Paulson's plan from 2008.)


  • February 18 2009 - US
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Answers (29)

You are spot on. This "plan" is nothing more than, as Marx once said about religion "An opiate for the people".  This is a very temporary dose of opium while the people are winding down the yellow brick road towards OZ.  Unfortunately for the people, the emerald city is further out of reach the faster the people run for it just like a mirage.  Whatever happened to personal accountability for bad decisions.   
  • February 18 2009
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Profile picture for Blue Nile
The only intent is to try to delay a large percentage of foreclosures until the market has a chance to stabalize.

Only problem is, the market cannot stabalize until there is no longer a back-log of foreclosures, thus the only real intent is to delay some foreclosures long enough for the government to inflate our way out of this.

It won't work, the market will still be saturated with foreclosures and the market will thus continue to drop like a rock.  But perhaps they can soften the overswing some?

  • February 18 2009
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Profile picture for jimmy57
Agreed, Pasadenan. 

But this "overshoot"  that everyone seems to assume --  I have ask: why should we expend public money trying prevent it? Is it really a "bad" thing, or just a natural part of the cycle that needs to happen in order to move forward?

  • February 18 2009
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Profile picture for Blue Nile
No one would care if we were only talking about 3 to 5% of the public; but when the foreclosures drive down values for the entire market and it affects 60 to 70% of all existing home owners, the question becomes how do you stop the masses from being on the streets and asking for handouts from the government and the Non-profits.

The people that bought over 10 years ago and didn't do cash-out refinancing didn't create this mess, and they shouldn't be forced out onto the street because of the mess.  Nor should people be "stuck", unable to liquidate their home because the market has no room for anything but foreclosures.

And the quesiton remains, how much "overswing" might we expect?  Maybe as much as 50%?  No jobs to pay the mortgage, taxes, and utilities, thus people forced to sell for 40% of the deflated value and declare bankruptsy?  80% of housing on most streets becoming "abandoned" and broken in/vandalized by gang members and emotionally unstable people?

Not that I think we can resolve the foreclosures or "rescue" anyone that made bad decissions, but I don't think they intend to.  They only want to reduce the foreclosures on the market at any given time so that people can sell normally.

  • February 18 2009
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Profile picture for Blue Nile
So, you really think that a house that was bought for $100k 20 years ago should be forced to sell for $20k in 2 years?  And you will force all the lenders out of business at the same time due to the forced decline of their assets?  And if all the banks go into bankruptsy, then all the publicy traded companies can file bankruptsy too?  Then the multi-billionares can buy up all the assets for pennies on the dollar, and force everyone else to be their "surfs".

Where will the snowball end?  No bailout will work, that is why they are trying to inflate out of the mess, which will only put fixed income people in extreme poverty.

We should disolve the government now and create a new declaration of independence and a new constitution.
  • February 18 2009
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Profile picture for angelesvista
so what do you do if your upside down but making your payments?
  • February 18 2009
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Profile picture for jimmy57
Pasadenan, honestly I can't see where your "overswing" doomsday numbers could be coming from, apart from your imagination.

BTW, I have come to really enjoy your trademark free-form spelling these many months.  "Surfs" is my new favorite! 
  • February 18 2009
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Profile picture for BMFPitt

I was happy with this in the same sort of way that I might be happy if I got shot, but it didn't hit any organs.  I was reading previews yesterday morning that the plan was going to be to help the most absurdly underserving deadbeats, whereas this plan will only help the moderately undeserving people on the verge of deadbeatness.

I only wish I could get one minute on camera with Obama or some prominent member of the White House or Congress that supports this, just so I can ask them why they want to keep housing unaffordable?  Also, I'd ask what is so horrible about losing a house you can't afford and never should have bought as opposed to being a renter living within their means?  Aside from a credit hit, I can see no difference at all.

Pasadenan - The people that bought over 10 years ago and didn't do cash-out refinancing didn't create this mess, and they shouldn't be forced out onto the street because of the mess.  Nor should people be "stuck", unable to liquidate their home because the market has no room for anything but foreclosures.

Can you explain how someone who bought a house 10 years ago and didn't cash out any equity might be "forced out onto the street?"

  • February 19 2009
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Profile picture for BMFPitt
So, you really think that a house that was bought for $100k 20 years ago should be forced to sell for $20k in 2 years?

Did the house burn down and get poured over by concrete while a pig farm moved in next door?  Because that's about the only way those numbers add up.  Also, why would they be "forced to sell," exactly?

And you will force all the lenders out of business at the same time due to the forced decline of their assets?

If they can't survivie without a government handout, absolutely.

And if all the banks go into bankruptsy, then all the publicy traded companies can file bankruptsy too?  Then the multi-billionares can buy up all the assets for pennies on the dollar, and force everyone else to be their "surfs".

Does that even make sense in your warped mind?
  • February 19 2009
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Profile picture for gbekaert
I know alot of you make your living facilitating loans. With the plan I would implicate you would have to seek employment with the government.

I purpose to stop ripping off american people for absorbent mortgages.
Yes the percentage could go to 4% and sound good but I purpose something more along the lines of car financing. For example you dont go out and buy a 30K car and pay 100k for it.

To bail out america and restore investment confidence. We must allow the Tresury or government entity to provide home loans without prejudice.

Anyone needing a home loan should be able to finance/refinance with a governmental program and not pay 3.5 times the price for a home. The
money should come from the taxpayers and the interest paid back to the taxpayers.

We should be able to buy a 350k house and pay back 432k over the 30 year term. Dont know what the interest rate would be but the payment would be 1200 a month plus tax and insurance.
  • February 19 2009
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Profile picture for gbekaert
Also to save the current homes from forclosure. We need to implement the plan without haste. I believe most people could afford this and would buy up all houses on the market. There should be some rise in real estate taxes and the money should go to the housing entity paying into the fund for housing. The taxpayers need to be relieved of housing loan bogus. Almost every american is struggling to put a roof over their head.
If we provide that at a reasonable cost we would be able to prosper, invest, retire. We need to be borrowing from a governmental taxpayer supplied agency with all interest and real estate taxes paid back to them. When houses become forclosed the agency will refurbish these homes from the fund and sell for profit paid to the fund. No government etitity can barrow from this fund. With all the layoffs we cant discriminate on ability to pay. These loans will be automatic for people who currently have loans and those who dont will only have to prove income ratio of 55%, this wont be a big challenge for people making 12.50 an hour would qualifiy for a 250k home with zero down 30 yr fixed no mortgage insurance. This is approximate. But you get the picture. 
We the people could actually prosper instead of continually fail.
It is now to the point where I can rent a nicer house for half of what I would spend in 30 years and invest the rest. This really has to change, we would have thousands of dollars a month to support our consumer based country. But thats another delema. Stop paying failing mortgage companies ripping us off, and we have to bail them out? we have been ripped off and now we have to pay for it. 
TO the house, senate, president. Help the people and your troubles with the economy will be fixed. Give us the ability to barrow from ourselves and pay the interest to ourselves.
  • February 19 2009
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Profile picture for BMFPitt

Also to save the current homes from forclosure. We need to implement the plan without haste.

Can you please tell me why this would be a good thing?

Can you please tell me why it is different than bailing out someone who runs up $200k in gambling debt on their credit cards?

Can you please tell me why those who were directly harmed by the actions of the deadbeats living beyond their means should pay more money to subsidize the deadbeats and keep housing unaffordable for themselves?

These loans will be automatic for people who currently have loans and those who dont will only have to prove income ratio of 55%, this wont be a big challenge for people making 12.50 an hour would qualifiy for a 250k home with zero down 30 yr fixed no mortgage insurance. This is approximate. But you get the picture.

Why not just give everyone a trillion dollars and a pony?

  • February 19 2009
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Profile picture for jimmy57
"Why not just give everyone a trillion dollars and a pony?"

Exactly.  Now that it's going to be tough going for awhile, we get to see who really thinks like an adult, and who reverts to childhood.  Adults accept that rewards come with a degree of risk; children expect that parents (the government assuming the role) will keep anything really bad from ever happening, and that if you do your chores and mind you manners you all good things will be given to you.
  • February 19 2009
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Profile picture for Blue Nile
"Can you explain how someone who bought a house 10 years ago and didn't cash out any equity might be "forced out onto the street?"

If the market is saturated with 80% foreclosures making it impossible for anyone else to sell, the market has an excessive "overswing" for the correction and even a 10 year owner can become "upsidedown".  And this extreme drop makes all the lending institutions "upsidedown" as well.  Thus many fold, layoff people, or file bankruptsy.  The result is the same.  A snowball of job losses in the community.  So an owner becomes unable to make the payment for 3 months due to job loss.  Can't refinance as the loan is already "upsidedown".  Cannot "sell" as the market is saturated with properties that are substantually underpriced that can't find a buyer.

So, the lender kicks out the owner that was not at all part of the bubble nor the lending foolishness.

And of course the renters may get kicked out for the same reasons, but it may be the owner's inability to make payments.

Really, the "option payment" foreclosure issue that is still to come is much more serious than most people want to admit.  The "sub prime" foreclosures were NOTHING in comparison.

  • February 19 2009
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Profile picture for Blue Nile
OK, I know I suggested something like this before the election..., and before the $750B that Bush pushed;
but I'll try again.

The problem is excess foreclosure inventory that won't move, but banks and mortgage companies need OFF of their balance sheets.

So, If a bank has a property they want liquidated and don't want to go through normal foreclosure process, they request that HUD buys it.  HUD pays for 3 local independent appraisals that become "public record".  Any that are more than 20% off of the others is thrown out and the appraiser automatically "investigated".  HUD gurarentees the lender it will pay 85% of the average of the remaining appraisals, to close within 2 weeks.   As soon as HUD publishes what it will pay, any member of public can offer the bank anything they want, as is; no revisions, no inspections, no termite work...  to close in 3 weeks.  They must provide evidence to the bank of their financial ability to pay as part of the offer.  The bank has the ability to sell to HUD or to another member of the public, but the property is off the market in less than one month.

Properties that HUD collects in this way HUD can hold on to to re-sell, can trade for other property to be used for section 8 housing, and HUD can lease to the current occupant at 1.2% per month of the total price HUD pays IF the occupant desires and HUD administration chooses to do so.  The occupant would not be offered the option of buying the property.

  • February 19 2009
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Profile picture for hervedv
We should be able to buy a 350k house and pay back 432k over the 30 year term. Dont know what the interest rate would be but the payment would be 1200 a month plus tax and insurance.

That is a rate of 1.5%! Who would lend money at that rate? It would
have to be a government fund. Gbekaert, I agree with you that your proposition would restore our economy. But what effect would this low rate have on the national debt? I don't see how this could be done, but I beliee you are onto something positive.
  • February 19 2009
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Profile picture for Blue Nile
A 1.5% interest rate to anyone that wants it, even with extremely bad credit, would not "restore the economy", it would put all financial institutions out of business. It would not even come close to covering their overhead.  And the foreclosures would be extreme.  A 1.5% loan to someone that is now paying over 200% for payday advance loans?

But I do agree that payday advance loans are "usery" and that those companies should be put out of business.

And what about the credit cards?  Can't expect people to pay 10% to 30% interest on those if the government offers 1.5% interest loans financed by borrowing money from China at 1%.

  • February 19 2009
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Profile picture for BMFPitt
Pasadean - If the market is saturated with 80% foreclosures making it impossible for anyone else to sell, the market has an excessive "overswing" for the correction and even a 10 year owner can become "upsidedown".

My market seems to be about 80% foreclosures right now.  Anyone who bought 10 years ago is still up close to 100% from where they bought.  And that's not even counting the equity they didn't cash out.

A snowball of job losses in the community.  So an owner becomes unable to make the payment for 3 months due to job loss.  Can't refinance as the loan is already "upsidedown".  Cannot "sell" as the market is saturated with properties that are substantually underpriced that can't find a buyer.
So, the lender kicks out the owner that was not at all part of the bubble nor the lending foolishness.


Nor does that have anything to do with house prices (even assuming this person was upside down, which would require about an 80% drop from peak - i.e. houses cost just a bit more than cars.)

And of course the renters may get kicked out for the same reasons, but it may be the owner's inability to make payments.

I would be fine with forcing banks to uphold rental agreements made in good faith for a minimum of 3-6 months after foreclosure.

The problem is excess foreclosure inventory that won't move, but banks and mortgage companies need OFF of their balance sheets.

No, the problem is that houses are still overpriced, and the government is throwing the kitchen sink at trying to keep it that way.

But I do agree that payday advance loans are "usery" and that those companies should be put out of business.

People that use those services tend to be so much of a credit risk as to justify the rates.
  • February 20 2009
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Profile picture for Blue Nile
Yes, you and I both agree that a 1.5% government sponsored interest rate for even the worst credit risks is an extremly foolish idea.

But even if we let the value of houses fall to 80% of the value of 10 years ago, this will still put all mortgage companies and all banks out of business.  Since the Government put all its trust in the private banks for the flow of dollars by getting rid of the Savings  &  Loans and the Thrift  &  Loans, the government feels obligated to "save" these institutions.  But rather than breaking up the monopoliles, they keep making them bigger and bigger, which causes an even bigger problem.  Sure, they can take them all over and nationalize the whole banking system, but most americans don't want a socialist bank with no competion and no alternatives.  It reminds them too much of the "mark of the beast", and that some people will be discriminated against and prevented from buying or selling.

So, instead, it is delay foreclosures, deflate the dollar, and "hope" that things level off sometime before all the banks fail.  This is not about "the people" as those on fixed incomes will substantually suffer as the dollar is devalued.  It is about saving the "mega-corporations" for the sake of the "system".


  • February 20 2009
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Profile picture for BMFPitt
Yes, you and I both agree that a 1.5% government sponsored interest rate for even the worst credit risks is an extremly foolish idea.

I say any government sponsored interest rate is a bad idea.

But even if we let the value of houses fall to 80% of the value of 10 years ago, this will still put all mortgage companies and all banks out of business.

Me and the world's smallest violin are not concerned.  Besides, the responsible companies would be fine.
  • February 20 2009
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Profile picture for jimmy57
I don't see how artificially-low interest rates, or buyer "incentives" are going to achieve much.  Neither addresses the problem of houses being over-valued.  Maybe you get a sales bump, maybe you get some upside-down borrowers to effectively rent their houses from the bank for another 6-12 months -- but ultimately, no one wants to pay (or borrow) for something that isn't going to hold its value.

I'm a bit disgusted that so many of these proposed "fixes" (buying up houses, buying up crap mortgages) treat government money like an inexhaustible resource.  Let's not fool ourselves, these assets aren't going to become valuable later; this is just putting the gambling losses of institutions and individuals on the backs of all taxpayers.


  • February 20 2009
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Profile picture for tippyT
I agree, I was expecting more. Needs to be $750 billion not $75 billion.
  • February 20 2009
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Profile picture for jimmy57
"Needs to be $750 billion not $75 billion."

Maybe Obama's team knows it's not going to do much, and 75B is all they're willing to blow for the sake of appearances.

But even as a PR move, it's already looking like another miscalculation, like Geithner's "I-dont-have-any-details-but-we're-working-on-a-swell-plan" speech. I'd be willing to bet they didn't count on the level of outrage they're hearing from renters (about a  third of the population) and responsible, prudent homeowners.  Not to mention the reaction of Wall Street.

This angle about out how I should help pay my neighbor's mortgage because his foreclosure might lower my property value-- I don't think enough people are buying that.


  • February 20 2009
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Home prices went too high; now they're correcting. The plan, though probably well intentioned, may only prolong the inevitable. --my humble opinion.
  • February 20 2009
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Profile picture for Blue Nile
Don't care that 95% of the U.S. banks will be put out of business and that all financial services will need to be provided by 50% of the existing Credit Unions and 5% of the existing financial banks?

I wouldn't care either if I actually thought they can pick up the slack; but that still produces a huge problem for the federal government that has gurenteed all depositors up to $250k, and if married, that can be up to $1M by simple having joint and separte accounts and trust account.  When those banks are folded, the tax payer is required to pay.  I don't think we have any clue how much that is, but I don't think trillioins would cover it.

Thus, the inevitable is the dollar will be devalued to less than 50% of present value, just as FDR did in the 1930's.  That is the model we are following.  Stabalise the banks by making the money worth less.  Thus property values continue to decline, but they stop declining sooner on paper, and thus people stop walking away from their loans.






  • February 20 2009
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Profile picture for jimmy57
With all due respect to P's vision of the Apocalypse, if I can return to the topic.....to point out a logical flaw in President Obama's stated reasoning for this plan.

He seeks to stabilize home prices;  BUT he only wants to help out a select group of upside-down borrowers, specifically NOT "the unscrupulous or irresponsible....[or] speculators."

We're told that we should support these bailouts because having a foreclosure nearby will devalue everyone's home's value (renters not considered, apparently)  But doesn't most every neighborhood have it's share of irresponsible buyers and speculators, and unless you rescue all of them, don't lower comps get set anyway?
  • February 21 2009
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I don't agree with most of you. To see what Obama's plan entails I would suggest you read this:









  • February 21 2009
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Profile picture for BMFPitt
Pasadean - Don't care that 95% of the U.S. banks will be put out of business and that all financial services will need to be provided by 50% of the existing Credit Unions and 5% of the existing financial banks?

Even if I thought that was likely, then no.  I still wouldn't care.

I wouldn't care either if I actually thought they can pick up the slack; but that still produces a huge problem for the federal government that has gurenteed all depositors up to $250k,

Under your scenario, paying that would be far cheaper than bailing out the banks.

nickhedges - I don't agree with most of you. To see what Obama's plan entails I would suggest you read this:
Summary of Obama's Housing Plan


All I had to do was look at the URL to decide I had no interest in reading what they had to say.
  • February 22 2009
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Profile picture for Blue Nile
BMF -

You may not care now, but if your employer is unable to issue a paycheck to you, or if you are unable to take that paycheck to any financial institution, and if there is no means of obtaining any cash due to lack of distribution, you may care.

On the other hand, if you are retired and all your transactions are "barter", it may not affect you.

Still, if no one in any store stocks any product due to the 4 months delay for cash flow and payment, you would probably still be impacted.

Probably no worse that forcing 95% of all gasoline stations to close.

  • February 22 2009
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